Sasha Kudler
Earlier this month, the U.S. Copyright Office and U.S. Patent and Trademark Office (the Offices) published the results of their long-awaited joint study on the policy and legal implications of non-fungible tokens, more commonly referred to as NFTs. The congressional report, entitled “Non-Fungible Tokens and Intellectual Property” (hereinafter “the Report”), offers a thorough perspective of NFTs from a copyright, trademark, and patent perspective.
The Report begins by discussing the technology behind NFTs, examining their uses, and explaining why a study was necessary to begin with. In the Report, an NFT is specifically defined as a “unique cryptographic token . . . the ownership of which is recorded to a blockchain (or another type of digital distributed ledger system) . . . that provides the owner rights in or access to one or more assets or entitlements.”[1] According to the Report, NFTs are used in a myriad of different contexts, from offering fans of a musician unique tickets and album art, to creating a new market for one-of-a-kind digital artwork.[2] As for why a study was necessary, the Report mentions that several Senators, as a result of the increased use and popularity of NFTs, made a request in 2022 for the Offices to author a joint study on “the various IP law and policy issues” that might arise.[3]
The Report then goes on to discuss NFTs in the context of all three forms of IP law. Beginning with copyright, the Report notes that copyright law is implicated by NFTs across three broad categories: storage and minting of NFTs, enforcement of rightsholders to NFTs against infringers, and how NFTs might interact with or change the copyright ecosystem.[4] Of particular interest under the third category is the possibility of downstream remuneration for artists. Although a copyright holder’s rights are limited by the first sale doctrine,[5] NFTs may allow artists to collect downstream revenue outside of the copyright system.[6] The application of current copyright law to NFTs is certainly interesting, but the Report concludes that “although NFT technology is novel, the copyright issues it raises generally are not.”[7]
Moving on to trademark, the Report notes that because NFTs function similarly to trademarks (in that they identify the source of a good or service), the market for NFTs represents an exciting new opportunity for “brand owners ‘to strengthen their brand identity.’”[8] The Report also notes three areas in which NFT technology may create complications in the trademark space, citing
potential difficulties around NFT-related goods obtaining trademark registration, uncertainty as to whether trademark registration can prevent use and registration of the same mark in connection with similar digital goods, and trademark infringement and enforcement challenges centered around NFTs.[9] The Offices report that although trademark infringement is a prevalent and serious issue in the NFT space, the majority of commenters felt that it was too soon to enact new trademark law around NFTs, particularly because the technology is evolving so rapidly.[10] The Report did mention, however, that the USPTO intends to continue offering NFT-specific guidance to trademark stakeholders, to ease them through this transitional period.[11]
Finally, in the patent space, the Report discusses the various ways in which NFTs can implicate patent law, including the potential use of NFTs to manage patent registration and ownership, and how NFT-related inventions might receive patents. Although the idea of using NFTs to manage patent ownership is compelling, the Report focused more on the second point, discussing recommendations it had received from commenters to increase USPTO guidance around NFTs and patent-eligibility.[12] Although the Offices received fewer comments around patent law relative to copyright and trademark,[13] the comments they did receive encouraged them to produce more and better guidance around NFTs and patents, since patent protection is “important to encourage continued innovation in this space.”[14]
Based on the Reports analysis of copyright, trademark, and patent, its conclusion comes as no surprise: study participants generally felt that, although NFTs represent an interesting and challenging technological shift, “changes to IP laws are not currently necessary to address the use of NFTs.”[15] Although the Offices agreed that a change in the law now would be “premature,”[16] there should be plenty of interesting developments as the NFT market, and blockchain technology more generally, transforms in the coming years.
[1] U.S. Copyright Office & U.S. Patent and Trademark Office, Non-Fungible Tokens and Intellectual Property: A Report to Congress 2 (2024).
[2] Id. at 9.
[3] Id. at 1.
[4] Id. at 14.
[5] See 17 U.S. Code § 109.
[6] U.S. Copyright Office & U.S. Patent and Trademark Office, Non-Fungible Tokens and Intellectual Property: A Report to Congress at v (2024).
[7] Id. at 42.
[8] Id. at 45.
[9] Id. at 46–47.
[10] Id. at 62.
[11] Id.
[12] Id. at 66.
[13] Id. at 70.
[14] Id. at 71.
[15] Id. at 72.
[16] Id.